Public Bill Committee

[Mr David Nuttall in the Chair]

Before we start, I have one or two quick preliminary points to make. I remind all Members and anyone in the Public Gallery to ensure that their electronic devices, mobile phones and the like are switched to silent. I remind the Committee that tea, coffee, hot chocolate and other hot drinks are not allowed during sittings. Members may, if they wish, remove their jackets during sittings. [Interruption.] You never know, the heating might get turned up.

Ordered,
That the Intellectual Property (Unjustified Threats) Bill [Lords] Committee do meet on Tuesdays when the House is sitting at 9.25am.—(Joseph Johnson.)

We will now start our line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room. I hope all Members have it. It shows the selected amendments. They have not been grouped and will be taken individually. A Member who has put their name to the amendment is called first. Other Members are then free to catch my eye to speak on any amendment they wish. To remind everyone, a Member may speak more than once in a single debate. I will use my discretion to decide whether to allow a separate stand-part debate on the individual clauses. In this case, that really only affects clause 1 following the debate on the relevant amendments.
Clause 1

Patents

Chi Onwurah: I beg to move amendment 1, in clause1,page2,line9,at end insert—
“(c)
commissioning a product for
disposal.”
This amendment would ensure the commissioner is treated the same as the manufacturer in the case of infringement. This would make it consistent with the arrangement for trademarks.
It is a pleasure to serve under your chairmanship, Mr Nuttall. In my speech on Second Reading last week, I noted that it is essential that the Bill makes sufficient provisions to protect manufacturers from unjustified threats. The Government, in bringing forward the Bill, made the claim that manufacturers and importers of infringing products do more commercial damage than retailers, stockists and customers. It has also been suggested that manufacturers, having invested in the product, are better placed to determine whether a threat of infringement proceedings is justified.
The amendment would ensure that commissioners and manufacturers are treated on an equal footing and go some way to protecting manufacturers. Such an arrangement already exists in trademark law. Any company that instructs or commissions work that applies a trademark it does not own is treated as a primary infringer and can be written to freely. That is not the case for patents and  designs. In such cases, the manufacturer is instead treated as the primary infringer. They can be written to freely, but under the Bill’s provisions the person or company that commissioned the manufacturers to do the work cannot be written to without fear of a threats action.
That is perhaps more troubling when we consider the unequal relationship that often prevails in such cases. More often than not, it is a larger company that commissions work and instigates the infringement of a design or patent, while the company carrying out the work is a smaller manufacturer, perhaps a small or medium-sized enterprise based in one of our constituencies. Many of those smaller manufacturers will not realistically be in a position to insist on indemnities in the contracts with the commissioner. We know how unequal contract negotiations often are between large companies and smaller companies in their supply chain. The manufacturer will get dragged into infringement action, as they can be written to freely, but the real prime mover is protected by the provisions in the Bill. As they stand, the provisions allow infringing commissioners to hide behind manufacturers, who would not be protected. This amendment would prevent such circumstances arising and I urge the Minister to accept it.

Jo Johnson: It is a pleasure to serve in Committee under your chairmanship, Mr Nuttall. I thank the hon. Member for Newcastle upon Tyne Central for her amendment, which gives us a chance to discuss this important IP legislation again in more detail. The existing IP legislation defines clearly those acts that  can infringe intellectual property rights. It is essential that the threats provisions are entirely consistent with those definitions of infringement. Otherwise, we would create a real mess for businesses in this area. The amendment would mean that threats made to someone “commissioning” an allegedly infringing product will not give rise to a threats action. The person commissioning would be treated in the same way as a manufacturer or importer. However, commissioning infringing goods is not itself an infringing act in any of the existing statutory definitions. That is an important point.
The amendment would therefore create an anomalous situation in which a threat to sue for infringement could safely be made to someone who is not, under the definitions, an infringer at all. There is no situation in which such a threat could be justified. The amendment would remove protection from people who are not actually infringers. That cannot be right. Treating commissioning as if it were an infringement, just for these purposes, would also bring confusion and inconsistency more widely to the law of infringement.
I want to make it clear that there is no inconsistency with the situation found in trademark law, to which the hon. Member for Newcastle upon Tyne Central referred. The provisions in the Bill relating to trademarks do not allow threats to be made for “commissioning”. The phrase
“causing a person to apply”
simply clarifies what is covered by the existing infringing acts in the Trade Marks Act 1994, in line with established case law. The amendment therefore seeks to address an issue that does not exist. For those reasons I ask the hon. Lady to withdraw her amendment.

Chi Onwurah: I thank the Minister for his clarifications and comments. Can he address my central point, which is that small manufacturers are in an unequal relationship with those commissioning the products to be manufactured, and the provisions in the Bill may put them at greater risk than those who are commissioning the infringing product? Will he consider ways in which small manufacturers can be better protected in the circumstances that I outlined?

Jo Johnson: I am happy to attempt that. Manufacturers will benefit from the way these provisions prevent distortions in the wider marketplace. No evidence has been presented to the Government that stakeholders want that important aspect of the provisions to change. Manufacturers are already given considerable protection by the way in which the provisions prevent threats being made to others. Given that manufacturers are often the worst affected by unjustified threats made to those further down the supply chain, it is their customers who are scared off by threats of infringement proceedings. That is why the provisions allow anyone aggrieved by the threat to make use of the provisions, not just the recipient.

Chi Onwurah: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Chi Onwurah: I beg to move amendment 2, in clause1, page2,line15,after “do,” insert “or claims to do,”.
This amendment deals with people or companies who hold themselves out as the primary infringer: ie, they claim to be the manufacturer or importer of a product (and therefore can be written to freely) when, in fact, they are not.
One of the virtues of the Bill is that it seeks to simplify and improve the workings of IP law and reduce the number of infringement cases brought before the courts for mistaken or outright false reasons. The amendment would enhance that aspect of the Bill by further reducing the scope for unnecessary litigation.
The amendment would allow people or companies that claim to be the primary infringer—that is, the manufacturer or importer of the product—to be communicated with freely by the rights holder, until it is clear that they are not the rights holder. That is a detailed point, and it may seem to be an obscure change, but it is important, otherwise I would not have tabled the amendment.
Under the Bill, the rights holder would not be able to communicate with a party falsely claiming to be the primary infringer, as that would run the risk of triggering the Bill’s provisions. If the amendment is agreed, the provisions would allow for communication from the rights holder until it is clear that the retailer or stockist is not, in fact, the manufacturer. That would reduce the impact on small and medium-sized enterprises—supporting SMEs is a constant theme of ours—and other organisations, because there would be fewer court actions and more such matters would be dealt with in the right way, which is directly between the participants. As such, I argue that the amendment is entirely in the spirit of the original Bill, and I ask the Government to accept it.

Jo Johnson: In order to provide much-needed protection to retailers and customers, it is crucial that the IP threats provisions encourage rights holders to communicate with the trade source of an infringement.  To facilitate that, the Bill sets out a clear statement of those acts that will not trigger an unjustified threats action.
The amendment would introduce circumstances where threats made to those further down the supply chain, such as retailers, would not give rise to an unjustified threats action. Those are exactly the people who should be protected by these provisions. The amendment would introduce the new concept of “claiming” to manufacture or import a product, and that is an inherently vague concept. It would no doubt be very difficult to prove in court and therefore the risk of satellite litigation on the point is considerable. Introducing the new concept would mean less certainty for businesses. It would likely be a long time before they would have clarity from case law about what constitutes “claiming”, and the additional complexity is unwelcome. The aim of the Bill is to help to clarify this area of law and make it easier to navigate.
Critically, the amendment would undermine protection for retailers and others further down the supply chain who inadvertently use ambiguous language, such as a reference to “our new product”. A retailer might easily imply, even accidentally, that it had made a product. Under the amendment, the retailer could lose all protection from unjustified threats. A rights owner may choose to rely on the public statement and issue a threat. By doing so, the rights owner chooses to risk that the recipient may bring a threats action. However, in the very unusual situation in which someone deliberately set out to entrap the rights holder, such behaviour would no doubt influence how the court would grant any remedies.
I am not convinced that there is an issue here that needs to be solved. If a rights holder is uncertain about whether a retailer is also a manufacturer, it can use a permitted communication to seek clarification. That removes the risk of an unjustified threats action. For those reasons, I ask the hon. Member for Newcastle upon Tyne Central to withdraw her amendment.

Chi Onwurah: I thank the Minister for his comments. I agreed in my speech that the amendment could appear obscure, but the fact is that supply chains are increasingly complex. He talked about the amendment introducing the new concept of claiming to be a manufacturer, but it is not a new concept in practice, given the increasing complexity of global supply chains. It may be a new concept to the Minister.
It is incredibly important that the Bill supports small businesses generally, and in particular our small manufacturers. At the least, it should not put further barriers in the way of their effective commercial working, because it is our small manufacturers that we hope to grow into large manufacturers and create the high-skill, high-wage jobs that we all seek for our future prosperity. I ask the Minister specifically to take a further look at the amendment or to consider different ways of achieving the same objective.

Question put, That the amendment be made.
The Committee divided:
Ayes 5, Noes 9.

Question accordingly negatived.

Chi Onwurah: I beg to move amendment 3, in clause1,page2,line19,at end insert
“or any other product or process having the same features so far as is material to the alleged infringement.”
This amendment would allow communications from the rights holder to the primary infringer to also refer to secondary infringing acts (by the primary infringer), without it constituting a threat.
As I noted earlier, it is a strength of the Bill that it simplifies the legal environment within which businesses operate. Any attempt to make the application of the law less costly and less uncertain is to be praised, particularly in an area, such as this one, that is so commercially sensitive and technical in many of its provisions. It is because of that that certain provisions in the Bill require amending to allow for greater certainty and to ensure that instances of infringement can be dealt with easily and with minimum fuss.
The amendment would allow communications from the rights holder to the primary infringer to also refer to secondary infringing acts by the primary infringer without it constituting a threat. In other words, rights holders would be able to refer to future infringing acts, or infringing acts that are fundamentally similar to the current infringing act. The amendment would enable them to be grouped together in communications.
The issue was raised by the Chartered Institute of Patent Attorneys in response to the Law Commission’s consultation. However, the Bill still does not reflect the CIPA’s concern that it does not allow the rights holder to ask the primary infringer not to infringe in future or not to infringe in a different way—that is, the secondary infringing acts. It leaves the rights holder with very narrow parameters for what they can say in communications to the primary infringer, allowing little room for manoeuvre. That is especially problematic when one again considers the case of small businesses holding rights. You may begin to detect a theme, Mr Nuttall, in terms of the Opposition’s constant concern for the protection of small businesses and in particular small manufacturers. Small businesses would not necessarily be able to afford advice on what communications were permissible, and could find themselves effectively bringing in other infringing communications without knowing it.
In the Bill as it stands, rights holders can refer only to current Acts without triggering the Bill’s provisions, and cannot refer to future Acts. That state of affairs seems to place an untenable level of burden on rights holders, and I ask the Minister to remedy it by accepting this amendment and—if he chooses not to do so—to detail his response to the Chartered Institute of Patent Attorneys,.

Jo Johnson: It is crucial that the threats provisions allow rights holders to enforce their rights, but also that they encourage rights holders to communicate with the trade source of an infringement—those performing what  are known as primary acts. For patents, that would include manufacturers and importers. The provisions will allow a threat to sue for infringement to be made to the manufacturer of a product, for example, a hair dryer. Threats can then also be made to that manufacturer for retailing that same hair dryer. Once the rights holder has found the manufacturer of the product, it is entirely sensible that the rights holder can raise all of the allegedly infringing acts they believe the manufacturer to be carrying out in relation to that product. That encourages sensible negotiation and helps to resolve the dispute.
However, the amendment would allow threats to be made to the same business for retailing similar hair dryers, even though the business in question is—for those products—merely acting as a pure retailer. That would chip away at the principle at the very heart of the threats provisions—that of protection for those further down the supply chain. The amendment would also blur the clear line between what does and does not give rise to a threats action, making it harder for rights holders to approach alleged primary infringers with confidence. In addition, the concept of “the same features so far as is material” is exceedingly vague and will create a great deal of uncertainty for business about whether products are, or are not, materially “the same”. I therefore ask the hon. Member for Newcastle upon Tyne Central to withdraw her amendment.

Chi Onwurah: I am disappointed that the Minister did not give more weight to CIPA’s concerns. His concern about the language being vague in certain provisions does not reflect the excellent work that I am sure could be done by his Department to make the language less vague. Equally, it does not reflect much of the language in existing provisions. However, I do not wish to test the patience—or, indeed, the presence—of the Committee, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 ordered to stand part of the Bill.

Clauses 2 to 9 ordered to stand part of the Bill.
New Clause 1

Review of the impact of exiting the European Union on provisions within this Act

“( ) Within 12 months of
this Act coming into force, the Secretary of State must prepare and
publish a report on the impact of the Government’s plans for
exiting the European Union on the provisions within this Act, and
must
A probing new clause to assess the impact of exiting the European Union on the provisions within this Act.

Brought up, and read the First time.

Chi Onwurah: I beg to move, That the clause be read a Second time.
We can all agree that the Bill is unusual, in so far as it is less controversial and rather more technical than many that are debated on the Floor of the House. However, I think we can also all agree that no Bill—however technical or uncontroversial—will be unaffected by the UK’s impending exit from the European Union. We are, of course, awaiting a ruling today.

Maria Eagle: We have the ruling: the Government lost by eight to three. The Supreme Court said that an Act of Parliament must be passed in this House and that the devolved Administrations will not have the power to stand in the way of Brexit.

Chi Onwurah: I thank my hon. Friend for bringing us the news that parliamentary sovereignty has been upheld.

Order. That might be relevant to the European Union, but the new clause is specifically about how the matter relates to this Bill. We must not allow the debate to go to wider questions; we must keep it to that issue.

Chi Onwurah: Thank you, Mr Nuttall. As always, we will follow your guidance. I was seeking not to extend this debate, but simply to acknowledge the great victory for parliamentary democracy.
No Bill can be indifferent or unimpacted by the UK’s impending exit from the European Union. Brexit will trigger profound changes in how the UK is governed and the ways in which our laws are enforced and implemented. That is no less true of intellectual property law than of any other area. It is therefore not in a partisan spirit that I move the new clause to require  a report from the Secretary of State on the impact that the Government’s plans for exiting the European Union will have on the Bill’s provisions.
Exiting the European Union will have numerous impacts on the application of patent law in particular. For instance, it is unclear whether we will remain members of the European Patent Office; I hope that the Minister will be able to clarify that. We would almost certainly not be able to join the new unified patent court, which will be open to participation from member states of the European Union only, and which, under current plans, would be partly based in London. I was involved in lobbying for that office to be based in London, given London and the UK’s leading position in patents and patent law.
It is difficult to see the movement in recent years towards developing a single European patent as anything other than positive, in so far as it renders patent law simpler, more consistent across Europe and therefore more easily accessible for small and medium-sized businesses. It is regrettable that our participation in that project has been thrown into question. Will the Minister commit to taking all necessary steps to ensure that patent law, and IP law more generally, does not take a retrograde step in terms of its coherence and applicability following Brexit?
As I noted earlier, intellectual property is an essential means of ensuring that innovation is rewarded. That is why we are here today and I think we all recognise the importance of rewarding innovation and creativity. As the UK makes its way in the world outside the European Union, our ability to support a high-wage, high-skill economy will depend on our ability to innovate and create new products and services that are welcomed across the world. IP law provides a crucial source of motivation and reassurance for investors in supporting new products. It is welcome that, through the Bill, the Government are taking steps to ensure that IP law  remains up to date and consistent; it would be troubling if the time and effort spent on the Bill were to be undermined following Brexit. I call on the Minister to accept the new clause and to ensure that the law in these areas remains consistent and easily applicable as we leave the European Union.

Maria Eagle: It is a pleasure to serve under your chairmanship, Mr Nuttall. I rise, briefly, to support my hon. Friend’s new clause and to give the Minister a chance to show, in view of the judgment that we have just heard about, a new openness from the Government to Parliament about the implications of the UK leaving the EU. He can be the first Minister to explain in detail precisely what the implications of leaving the EU are on the provisions that he seeks to take through the House to become an Act of Parliament. We need to know that the good intentions and good measures contained in the Bill, which have widespread support across the Committee and I am sure will have widespread support across the House, will not be undermined by other things that the Government are focusing on doing in the broader political sphere.
My hon. Friend said that the UK is a signatory to the unified patent court agreement, which establishes the unified patent court, common to all participating states. It deals with disputes relating to European patents and European patents with unitary effect. The provisions seem to demonstrate that the jurisdiction of that court is intended to be pretty wide and to cover a lot of those businesses and entrepreneurs that the Bill seeks to assist by removing the threat of unjustified litigation.
It is tremendously important that the Minister sets out as fully as possible what the implications of us leaving the EU are for the operation of that court. Will we still be members? Do the Government intend to remain in some way opted into that common European provision? To what extent does our membership of the court depend on our remaining a member of the European Union? Will it be possible for us to opt into the operations of the court, which would be a good thing? Even if it is possible, what is the Government’s intention, because the Prime Minister said in her speech that she does not want us to be half in, half out? Does the Minister think that if we remain part of the European patent court, we would be half in, half out of the EU, or are we going to be purists?

Chi Onwurah: My hon. Friend’s excellent contribution makes me recall my time working as head of market development for an American telecommunications company, which was looking to invest in and roll out across Europe. One of the significant costs that we encountered was related to the need to apply for patents and to consider patent law separately in each jurisdiction of the European Union. Given the Prime Minister’s planned visit to the United States to meet its new President, does my hon. Friend agree that the unified patent court will be part of attracting investment, particularly American investment, to the UK in future?

Maria Eagle: I agree that anything that reduces the costs of doing business across jurisdictions—with appropriate safeguards, of course—will be welcomed  by businesses and companies that seek to do just that. Given that as we leave the European Union we will have to be more outward looking and focused on trade, immediately acting to impose extra burdens on businesses that might be seeking to invest in this country is not a particularly good signal. However, the Minister may well be about to provide us with every ounce of assurance possible and set out in full the Government’s intention with regard to our participation in the court.

Jo Johnson: I thank the hon. Member for Newcastle upon Tyne Central again for her new clause and for the opportunity to touch on this morning’s court judgment. It was, however, delivered after the start of our proceedings, so I have not had the chance to look at it in full, although I can tell hon. Members that the Secretary of State for Exiting the European Union will make a statement to the House at, I believe, 12.30 this afternoon, which will no doubt provide them with more information about the Government’s response.

Maria Eagle: Will the Minister enlighten us about the Government’s intention towards the unified patent court agreement?

Jo Johnson: I will happily come on to that in due course. I remind the hon. Lady that the Bill is not part of the ratification process for the unified patent court and we are in danger of straying off topic and beyond the scope of the Bill.
The new clause would require the Secretary of State to report on the impact of the Government’s plans for exiting the European Union on the provisions of the Bill within 12 months of it coming into force. The Law Commission review that led to the Bill was of the existing threat provisions that apply to all patents, trademarks and designs that have force in the UK, including the relevant EU-wide rights. The Bill therefore applies the new threat provisions to EU trademarks and community design rights.
It is important that businesses in the UK are protected against unjustified threats in relation to their activities in the UK, regardless of whether those threats relate to infringement of a UK national intellectual property right or an EU-wide IP right that is in force in the UK. Not to cover EU-wide IP rights in so far as they apply to the UK would leave a large loophole and make the threats regime inconsistent across relevant IP rights.
In answer to the remarks of the hon. Member for Garston and Halewood, there is no question of the UK leaving the European Patent Office and the international patent convention that underpins it. It is not connected to the EU.
The Bill also ensures that the threats regime is compatible with the proposed unitary patent and unified patent court, when they come into effect. The Law Commission did detailed work with legal and business interests on that specific point. For as long as we are members of the EU, the UK will continue to play a full and active role. Ensuring that the IP regime continues to function properly for EU-wide rights is an example of that. However, that position and our decision to proceed with ratification of the UPC should not be seen as  pre-empting the UK’s objectives in the forthcoming negotiations with the EU. No decision has been taken on our future involvement in the EU IP framework once we have left. That will be part of the negotiations, which have not yet begun.
It is likely that the negotiations will still be in progress one year on from the point at which the Bill would come into force—the point at which the new clause would require us to report. The Prime Minister has been firm that we will not provide a running commentary on negotiations. Publishing the report required by the new clause could well undermine our ability to negotiate the best deal for Britain in this area.
In her speech on 17 January, the Prime Minster set out our negotiating objectives for Brexit. We seek an equal partnership between an independent, self-governing, global Britain and our friends and allies in the EU. The UK has one of the best IP regimes in the world and our work continues to support and develop that. The UK leaving the EU will not change that. We will continue to deliver high-quality rights-granting services, to lead the world in IP enforcement and to be a positive force in  the international IP arena. In light of my remarks, I ask the hon. Member for Newcastle upon Tyne Central to withdraw her new clause.

Chi Onwurah: Let me start by saying that I welcome the Minister’s clarification on us remaining a member of the European Patent Office. At least, I think it was a clarification; it was not entirely clear whether it was a clarification or simply an exposition on the current status.
In the Minister’s response to the questions put and the comments made by my hon. Friend the Member for Garston and Halewood, he did not seem to recognise the respect for Parliament and accountability to Parliament that—I do not want to try the patience of the Chair—today’s judgment has enforced and reflected. He gave that as a reason why he cannot deliver a report on the implications, but his position is highly inconsistent. My hon. Friend characterised it as sitting on the fence, but it is an inconsistent fence. It is almost like sitting on two fences that are one.
At the same time as the Minister said it is clear that we are a member of the European Union until we are no longer a member of the European Union, he also said that that was not to presuppose any of the negotiations. He then effectively refused to give any kind of report on the implications of the negotiations when throughout the world investors who are considering investing in the UK and the manufacturing of particular products will be in a state of uncertainty. As I am sure the Minister and everyone on the Government Benches recognise—we certainly recognise it on the Opposition Benches—uncertainty is the death knell for business. Business needs as much certainty as is possible.
Given that we are in such uncertain times, not to be prepared to offer a little more certainty by giving a report one year out on the implications for patents of such a big change in our legislative framework seems short-sighted. I hope that the Minister has now had time to reflect—and perhaps to look at the judgment on his electronic device—and feels able to consider supporting the new clause, which would create a not unjustified level of sharing of implications and reduce business  uncertainty. I am sure we can all agree that that is important, as we move towards leaving the European Union. The Minister does not seem inclined to respond to my appeal, so I will press the new clause to a Division.

Question put, That the clause be read a Second time.
The Committee divided:
Ayes 5, Noes 9.

Question accordingly negatived.

Bill to be reported, without amendment.

Committee rose.